Dynatrace Boosts Its AI Observability Portfolio With Arize Acquisition

There’s a growing need for tools to monitor and manage AI applications and agents and measure the quality of their output. Dynatrace looks to meet that demand by adding Arize’s technology to its observability platform.

Dynatrace is expanding its portfolio of observability offerings with a deal to acquire Arize, developer of the Arize AX platform used by developers to evaluate their large language model applications and autonomous AI agents during development and in production.

Dynatrace said Thursday that it signed a definitive agreement to buy Arize in a cash and stock transaction valued at $915 million.

AI observability has emerged as one of the biggest challenges in managing AI technology. While businesses and organizations are developing and deploying AI systems at a rapid pace, they are often flying blind when it comes to monitoring those systems to ensure they are effectively and safely doing what they are built to do.

“AI is now moving into production at incredible speed, and the resulting AI observability market opportunity is enormous,” Dynatrace CEO Rick McConnell said in a statement announcing the acquisition deal.

“Acquiring Arize advances our AI observability leadership, accelerates our roadmap, enhances our long-term growth profile, expands our reach with the developer community, and adds an incredible AI-first team to Dynatrace,” the CEO said.

AI observability is one of the fastest growing categories in the broader observability space, projected to exceed $10 billion by 2030, and “is central to Dynatrace’s growth strategy,” the company said.

Dynatrace, headquartered in Boston, is one of the leading companies in the observability arena with its unified observability, security and software automation platform. The system’s capabilities span application and AI observability, IT infrastructure monitoring, application security, log data management and analytics, digital experience monitoring, and key performance indicator data analysis.

Arize AX is purpose-built for AI and agent observability. The enterprise-scale, fully managed SaaS platform provides automated trace observability capabilities, based on the OpenTelemetry and OpenInference standards, that track how multi-step agent workflows execute, how tools are called, and where latency or errors occur.

Arize AX, for example, measures AI output quality by determining hallucination rates and the overall correctness of AI responses and actions. It’s real-time production monitoring capabilities continuously validates AI behavior and detects system failures, performance degradation and data drift.

“We founded Aize because AI teams needed a way to know their agents were actually working correctly, not just running,” Arize CEO Jason Lopatecki said in the acquisition announcement. “Joining Dynatrace will enable us to take that mission much further. Together, we can bring AI evaluation and software observability into an end-to-end system, enabling teams to build more ambitious AI applications faster.”

Dynatrace said the addition of Arize to the Dynatrace Observability Platform will provide partners and customers with unified context for understanding AI behavior and business impact, connecting AI model and agent evaluations with “application performance, infrastructure health, and business outcomes.”

Dynatrace expects to close the acquisition of San Francisco-based Arize either later this quarter (ending Sept. 30) or early in Dynatrace’s third quarter, subject to regulatory reviews and customary closing conditions. The $915 million sale price includes approximately $815 million in cash along with replacement equity awards for Arize employees joining Dynatrace.

Arize’s founders, Lopatecki and Aparna Dhinakaran, will both join Dynatrace. Lopatecki will continue to lead the Arize team and will report directly to Dynatrace CEO McConnell.